Pencil uses the percentage of completion method of accounting. In 2014, began wo

Question

Pencil uses the percentage of completion method of accounting. In 2014, began work on a 2 year construction of a major highway for a contract price of $3,300,000. Pencil provides you with the following information: 2013 2014 Costs incurred during the year $960,000 $2,137,500 Estimated costs to complete as at 12/31 $1,440,000. Provide Calculations

a. What portion of the total contract price would be recognized as revenue in 2013?

b. What portion of the total contract price would be recognized as revenue in 2014?

Explanation / Answer

=[Cost incurred in 2013/ Cost incurred in 2013+Estimated cost to complete] x Total Contract price

={$960,000/[$960,000 + $1,440,000]} x $3,300,000

=$ 1,320,000

b. What portion of the total contract price would be recognized as revenue in 2014?

Revenue recognized in 2014=Total Contract Price-Revenue Recongized in 2013
                                               =$3,.300,000-$1,320,00

                                               =$ 1,980,000

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.